A property valued at $20,000,000 is expected to generate NOI of $960,000 next year. Given current

market conditions, banks require minimum DSCR of 120% and maximum LTV of 65% for a 7-year interest-only mortgage at 5% fixed with monthly payments.

a. What is the maximum loan amount a bank will be Willing to underwrite on this property and how

much equity will the investor have to put down?

b. If NOl remain constant, by how much should cap rates increase for the property be under water

i.e., its value to fall below the loan balance?

c. Ifthe property's NOI and price drop each by 10% over the 7-year period, will the investor be able

to refinance the loan at the initial DSCR and LTV?

d. If your answer to the above question is negative, how much higher should month payments have

been during the 7 years, if the loan were structured as a balloon mortgage, for it to be refinanceable at maturity (at the end of the 7 years) given the assumptions in question c?